FTC to Regulate Blogger Claims (I was Not Paid to Say This)

Should the federal government regulate what blogger’s blog? Yes, said the Federal Trade Commission yesterday — at least when it comes to product endorsements.

At issue were the FTC’s guidelines concerning the use of endorsements in advertising. These guidelines, among other things, require paid endorsers of products to disclose their relationships with advertisers. The goal is a good one, to prevent deception and fraud. In practice, the lines are hard to draw — what exactly is an endorsement? What constitutes payment? It gets even harder in today’s world of user-generated media, in which much advertising is by consumers themselves on blogs and elsewhere, sharing recommendations and opinions on just about everything.

In revisions announced Monday, the FTC explicitly extended the rules to blogs for the first time. Perhaps more importantly, it did so even for casual bloggers with only the slightest compensation from the seller. Here’s an example from the guidelines:

“A college student who has earned a reputation as a video game expert maintains a personal weblog or “blog” where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. Because his review is disseminated via a form of consumergenerated media in which his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact likely would materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge.”

In effect, the blogging college student is pigeon-holed as a paid endorser, even though he hasn’t been paid to say anything in particular, and only receives what looks like rather common promotional material.

He likely doesn’t even see himself as an endorser of any kind, he just writes his opinions, which others find useful. No one is hurt. Yet, unless he discloses that he got the video — gasp — for free, he may find himself facing fines from Washington.

Its a classic example well-intentioned rule taken too far. And not only are consumers hurt — as product recommendations from other consumers are made scarcer, but free speech itself is chilled as individuals become less willing to put virtual pen to virtual paper out of fear that they may violate some obscure federal rule.

It is a decision I cannot endorse.

[10/7 update: An astute reader noted that the blogger in the illustration above received a “video system,” not a “video,” a much more valuable item. Nevertheless, I remain troubled by the guidelines application.]

James Gattuso / James Gattuso is a Senior Research Fellow in Regulatory Policy in the Roe Institute for Economic Policy Studies at The Heritage Foundation. Gattuso also leads the Enterprise and Free Markets Initiative at Heritage, with responsiblity for a range of regulatory and market issues. Prior to joining Heritage, he served as Vice President for Policy at the Competitive Enterprise Institute and also as Vice President for Policy Development with Citizens for a Sound Economy (CSE). From 1990 to 1993, he was Deputy Chief of the Office of Plans and Policy at the Federal Communications Commission. From May 1991 to June 1992, he was detailed from the FCC to the office of Vice President Dan Quayle, where he served as Associate Director of the President's Council on Competitiveness. He lives in Alexandria, Virginia with his wife Dana, 8 year-old son, Peter (whom he relies upon to operate his VCR), and his four year-old daughter Lindsey (who does the DVD player.) He has no known hobbies, but is not nearly as boring as he seems.